December Employment Surprises on the Downside

Despite anemic overall hiring in December, total hiring was roughly the same in 2013 as it was in 2012. The unexpectedly tepid monthly numbers probably won’t cause a delay in the Fed’s tapering.

The fact that the U.S. economy created only 74,000 new jobs in December – the fewest in about three years – had analysts and observers scratching their heads on Friday, some of whom cited the worse-than-usual weather as part of the reason. At least one industry affected by the weather lost jobs: Construction employment edged down in December by 16,000, to end a year in which the industry added an average of 10,000 jobs per month. Also, transportation employment was down, and leisure and hospitality barely moved up.

Healthcare, which has been adding jobs most months, actually lost 6,000 positions in December, after creating an average of 17,000 per month in 2013. Other industries created jobs in December, but at a slowish pace. Professional and business services jobs, for example, were up 19,000; for the whole year, job growth in that category averaged 53,000 per month.

Retail hiring, by contrast, was fairly robust for the month, which hints at fairly good retail sales for the holidays, since retailers expand their workforce temporarily in anticipation of sales volume. Retailers created a net of 176,000 positions in December (the figure isn’t seasonally adjusted), which is the highest total since 1999.

Almost As Many Jobs Created in 2013 as 2012

Despite anemic overall hiring in December, total hiring was roughly the same in 2013 – a 2.186 million net increase — as it was in 2012, when there was a 2.193 million net increase. About that many jobs were created each year during the mid-2000s. The only years during the last 10 during which jobs were lost remain 2008 and 2009, years that shed 3.617 million and 5.052 million, respectively, or 8.669 million all together. The job market is still recovering from these two years: since 2010, a total of 8.135 million jobs have been created.

The headline unemployment number was down in December, but with such sluggish job growth, mostly not for the right reason: a lot of people simply dropped out of the labor force. According to the BLS, the Labor Force Participation Rate, which is the percentage of the working age population in the work force, decreased in December to 62.8 percent from 63 percent in November.

All together, the number of unemployed persons declined by 490,000 to 10.4 million in December, driving the unemployment rate down by 0.3 percentage points to 6.7 percent. Over the year, the number of unemployed persons and the unemployment rate were down by 1.9 million and 1.2 percentage points, respectively.

Fed Probably Will Stick with Tapering

The unexpectedly tepid monthly numbers probably won’t cause a delay in the Fed’s tapering of its bond-buying, which is slated to begin this month when it acquires $75 billion worth of bonds, as opposed to $85 billion. St. Louis Fed president James Bullard said in Indianapolis on Friday that he didn’t think the central bank would be spooked by one bad month – and that the December employment figure would probably be revised upward in any case. The FOMC’s next meeting will be Jan. 28-29, just ahead of Janet Yellen becoming chair, at which the Fed will presumably decide whether to taper more in February.

Wall Street dropped as soon as the jobs numbers were announced on Friday, but spent much of the rest of the day recovering, with the indices ending mixed. The Dow Jones Industrial Average lost 7.71 points, or 0.05 percent, but the S&P 500 and the Nasdaq were up 0.23 percent and 0.44 percent, respectively.